As thousands of applications for student debt forgiveness poured into the U.S. Education Department, the Trump administration cut the staff working on the claims and ordered a halt to an overhaul of the system, according to the agency's inspector general.
The result: Claims lingered month after month.
A letter from the agency watchdog to Sen. Richard J. Durbin, D-Ill., obtained Wednesday, June 13, by The Washington Post, sheds light on the Education Department's controversial handling of more than 100,000 debt relief claims submitted by defrauded student loan borrowers.
The unit charged with sifting through applications began developing protocols to simplify the process in January 2017. But James Manning, then an acting undersecretary, directed the unit to stop, according to the letter.
Education Department staff wanted to create more categories to sort the allegations made by former Corinthian College students, who constituted the lion's share of applications. Manning quashed that plan and halted the entire approval system, arguing that the new administration needed more time to review existing polices.
While Manning evaluated those policies and asked the inspector general to do the same, the Office of Federal Student Aid reduced the number of contractors staffing the unit by more than two-thirds. Not a single application was approved or denied for almost a year, though the Trump administration had received more than 25,000 new submissions.
"If Mr. Manning wants to provide the flimsy excuse that this work was halted as part of a routine review by the new administration, I have a simple question for him: Have you ordered that work to be restarted, and provided the necessary personnel and resources to carry it out?" said Durbin, who in May requested more information on the claims process from the inspector general.
Education Department spokesman Chris Greene said the agency has hired more contractors since restarting the claims process in December. The department has the authority to forgive federal student loans when a college uses illegal tactics to persuade a student to borrow money, under a federal statute known as borrower defense to repayment.
"After the administration announced its new [borrower defense] policies, [the Office of Federal Student Aid] began ramping up contractor staff to support [borrower defense] claim processing under the new policies," Greene said. "While that ramp-up process is ongoing, today [Federal Student Aid] has approximately 16 contractor staff in place supporting claim processing."
Greene noted that while the inspector general reviewed the process, the claims unit continued to develop a database to manage applications and test methods of improving the system to "ensure they met policy objectives and legal requirements."
The department instituted a policy providing relief to Corinthian borrowers by comparing the average earnings of students in similar vocational programs - a strategy that is the basis of an ongoing lawsuit.
Shortly before that policy was unveiled in December, the inspector general issued a report admonishing the department for failing to clear the backlog of debt relief applications. The report acknowledged that the procedure for processing claims needed improvement, but it said the system worked well enough that there was no excuse for the Trump administration and Education Secretary Betsy DeVos to halt operations.
"The DeVos administration requested an [inspector general] report that found there were no substantive flaws in a debt relief program that the department continues to pause," said Aaron Ament, a former staffer at the Education Department under Obama who now heads the National Student Legal Defense Network, a legal aid service. "The real inquiry should now be into why Secretary DeVos continues to refuse to even decide on tens of thousands of claims from defrauded student loan borrowers."
Scores of applicants who attended ITT Technical Institute, DeVry University and other for-profit colleges are still awaiting a decision about their cases from the department; some had submitted claims during the Obama administration. The Century Foundation, a left-leaning think tank, said a Freedom of Information Act request revealed that as of early March, the department had at least 127,817 applications on hand.
"The inspector general's revelation that Mr. Manning ordered staff to halt work - work that was gathering the basis for additional relief for Corinthian and other defrauded students - proves that Secretary DeVos and the Trump administration have no interest in providing the relief to which defrauded student borrowers are entitled under the law," Durbin said. "Borrowers who were defrauded by Corinthian, ITT Tech, Westwood and other for-profit colleges should be outraged."
Story by Danielle Douglas-Gabriel. Douglas-Gabriel covers the economics of education, writing about the financial lives of students, from when they take out student debt through their experiences in the job market. Before that, she wrote about the banking industry.